After an introduction from Solo Energy through their STO, NEM Ventures has been working with NEM Europe, Tech Bureau, Techemy and the Core Devs to work out how to adopt the Verified Token Framework for Security Tokens on Catapult and are proud to be able say NEM is included as a founding member of the Blockchain Token Association and the VTF.

This is a framework for what security tokens should support in a technology agnostic way - a base set of functional requirements for STOs which we can extend and build on over time. It has been written by various notable names and NEM is in there alongside them.

It helps position Catapult as a chain that natively supports compliant security token launches and we are the first non Ethereum chain to get involved. The devs are targetting version 1 of public chain release for this.

Huge thanks to all involved behind the scenes in validating and organising this one. Further press releases will drop over the coming days.

Nothing to do with the election ;). We are watching and interested but it doesn’t impact either way on our plans as such - except that some of the people involved are very busy.

The holding company incorporated this week and the final paperwork on the trust is going through as we speak which allows the funds to be absorbed. After that the subsidiary (Ventures) can be done. There have been a couple of unexpected delays of a few days here and there but its still on track. We should be making a bigger announcement before Christmas, possibly in a day or two depending on legal processes.

We plan to release as much info as possible/sensible on where we have ended up, just want to make sure it gets over the line fully first to avoid confusion.

After assessing 16 jurisdictions
against various criteria and with legal advice from the more appropriate ones, we have elected to incorporate in Gibraltar a flexible group structure that can expand/evolve as needed. Gibraltar was selected due to clear DLT legislation, experience with offshore finance, clear taxation regime and access to banking infrastructure for crypto businesses. We are able to move in the future if needed.

The group structure is below:

A purpose trust that lives in perpetuity for the good of nem.

A holding company limited by guarantee owned by the trust and is parent of any subsidiaries, with NEM Ventures being the first. The CLG controls budget for all subsidiaries.

NEM Ventures, a standard Ltd owned by the holding company to make investments on behalf of the parent and ultimately the trust.

After discussions around potential fund restructuring and evolution in catapult, a group of key stakeholders, drawn from various sources within the ecosystem such that no single stakeholder has majority, decided to fund ventures not from the NCF but from a different, mostly dormant fund, that is sized close to the short term operating requirements and will sustain until catapult is launched. Many of those key stakeholders are also key holders, so for security reasons, those stakeholders cannot be disclosed. If they wish to come forward, that is their prerogative.

We are aiming to agree funding for our first projects in January and will be reviewing new projects in parallel - this is now our sole focus.

There will be regular communications in the coming weeks that will provide deep dive information on aspects such as projects funding, how we came to the jurisdiction decision, structure, the team, usage and choice of funds. We expect to formally field any questions raised in those future communication releases.

For now we would like to give a huge thank you and merry xmas to the whole NEM community and those who have worked with us to arrive at this point.

We will post translations for Japanese, Chinese, Spanish and Russian shortly.

Happy new year and we hope you enjoyed the festive period with those who are important to you, and maybe even had chance for a rest!

Update on the backlog primarily:

We have just sent out communications to several projects in the initial NCF backlog that have not responded or have only partially responded to initial review questions, these were sent out several weeks ago now and a deadline has been set of 11th January for responses to come back. Any proposals not responding by that time will be removed from the backlog to allow us to focus on those opportunities that are engaging.

At this stage there are 17 proposals in the backlog from the original 24 (7 dropped our or didn’t respond to initial engagements). We have received full responses from 12 of those 17 so far. There are several promising opportunities that we will expand on as details are assessed and negotiated wherever we can, naturally this is likely to be after a deal has been signed and announced in conjunction with the startups management teams.

Now that incorporation is largely complete, some paperwork and banking tidy ongoing in parallel; we intend to review these responses in the next two weeks and to try and give some certainty to all backlog proposals by the end of January.

In other news:

At this stage, we expect to open for new proposals by the end of January but it is still dependent on clearing the backlog proposals and we will update with a confirmed date to reopen the pipeline as soon as we can.

We have been approached by a few companies/VCs for either co-investment opportunities or additional fund launches. We are assessing how best to work on these opportunities and will have a more concrete plan as we get into normal operations. Some of the initial investments may be large enough for co-investment options and we will be in touch with those parties directly in due course if they are. Thanks to the various members of the community who have made these introductions.

You can expect to see some of the additional information on how decisions have been reached, jurisdictions etc etc in the coming days now we are all back from the festive break.

We are actively speaking to the first investment at present and expect to commence discussions with the other successful projects by the end of next week once we review all the first round questions responses.

Naturally the details of who, how much etc will wait until negotiations are complete and some company’s service providers (mainly legal and finance) are still away from Christmas so we will update as soon as we can.

Quick update - we are still on track to respond to most projects on their position by the end of this week.

Last week we sent a message to all proposals that had not responded to the first round due diligence questions requesting they respond by 11th of January. Some did and some did not -; today we have closed the proposals that did not and informed them by email.

The crypto space is a complex and ever developing area. It was critical that we found a jurisdiction that we were comfortable with, and equally where they were comfortable with us, for both now and the longer term. In an ever changing market we assessed 16 jurisdictions to ensure we were making an informed and educated decision on regulation, support and operational running including banking, of Nem Ventures.

Having established a shortlist of 6 that consisted of

Estonia,
Bermuda,
Gibraltar,
Switzerland,
Malta
Singapore

we quickly whittled that down to three after conversations with in country lawyers. Those conversations with legal representation continued in Bermuda, Malta and Gibraltar and we leveraged our own personal networks to have work done on potential structures and set ups that vary slightly between jurisdictions - at no cost to NEM.

It became clear it was possible to utilise any of the three, however Bermuda had yet to resolve the ability to easily open in country bank accounts and Malta has a more complex tax system that involved paying and claiming rebates, additionally the professional services organisations we dealt with did not inspire us for an ongoing relationship. Gibraltar has clear DLT legislation, established banking capability, clear tax regulations, we found multiple established professional services entities that could help now and ongoing and importantly it is possible to move to another jurisdiction if the situation changes in the future for some reason.

Once we focussed on Gibraltar, Ventures representatives attended the GibFin conference in London late October 2018. Here we were able to have face to face conversations with the banks in the jurisdiction to understand better what challenges and requirements they have. We spoke with the regulator with whom we discussed how they are building DLT regulation from the bottom up rather than trying to manipulate traditional regulation into accepting DLT, and how they view DLT as the next key component to their economic progress after the successes they have had within the gambling industry.

We were fortunate to speak to the founder of the Gibraltar Stock Exchange and understand the work that they are doing to give them the platform to promote STO and their attempts to baseline standards on a global scale, they are also a founding member of the Verified Token Framework alongside NEM. Finally it was reassuring to speak with the Head of Commerce for Gibraltar and to hear how the government are focussed on making DLT succeed, promoting DLT degree courses at the university, and encouraging businesses within the space to call Gibraltar home.

All the short listed jurisdictions are capable of being home to blockchain companies. In Gibraltar we think we have a lasting solution with a government and regulator that has a strong focus on making this a success and therefore we are happy to have created Nem Ventures there.

Group Structure

How to get a source of funds, effectively owned by no-one, into a position to be able to legitimately invest in fantastic start ups? What is the best way to protect that fund with checks and balances so that it can only be used for its original purpose? And what are the legal requirements and practicalities that would enable it to work in the most efficient way possible?

These are some of the questions we had to consider when setting up Nem Ventures. From the off we know we will need to be transparent and open about the way we work for the community, potential investees, and regulators. To do this we engaged with governance and legal experts and came up with a number of options, all with positives and negatives, with the following set up selected

Purpose Trust
Company Limited By Guarantee
Ventures Ltd

What’s a Purpose Trust and why are we using it?

The trust entity does not die and does not have inheritors or beneficiaries. It serves one main purpose - to be not for profit and for the betterment of the NEM ecosystem. Its first function is to take the XEM and pay it into the Company Limited by Guarantee. Thereafter it becomes the only member of the Company Limited by Guarantee.

The huge advantage of the purpose trust is that it provides a way to ensure that the trust lives on for the benefit of NEM. Should the board of the Company Limited by Guarantee be dishonest and be liquidated/made insolvent, the money goes to the trust and not to the directors of the company.

Ok so what’s a Company Limited by Guarantee?

The CLG does not have any shareholders and does not do profit distribution. It is formed of 7 directors at our request and they consist of trusted NEMbers and expertise in commercial and governance matters.

So that just leaves Nem Ventures….

Nem Ventures is a company limited by shares. It consists of the directors as stated in the proposal and two others (one legal and one technical expert). Its shares are owned by the Company Limited by Guarantee and part owned by the directors as per the proposal. It has a mandate to create a sustainable fund and to investigate and take share positions (or other financial instrument assistance) in projects/businesses that are looking to utilise the NEM blockchain and ecosystem. Ventures has a responsibility and duty to ensure that it is professional and will call on technical/accounting/legal resources to ensure that itself and its investee businesses have the greatest chance of success.

Seems simple right? Distilled down we believe and have had confirmed with independent advisors, that with this structure we limit the liability of the investment company while securing the funding at a trust level to ensure that the xem is protected and secured against individual foul play.

So what about changing money, and the control of XEM?

We are working with the banks in Gibraltar and investigating further work by one of the big 4 accountancy firms to aid us in transactions between countries/ventures/projects. Part of this investigation, which we were able to progress once incorporated, was to align ourselves with potential partners for Over the Counter transactions of NEM. It is a little bit of a ‘watch this space’ statement at the moment but we have in principle agreements that will allow us to exchange XEM without an affect on the market.

Projects for Nem Ventures

With 26 projects in the backlog we knew that the reviewing and following up on investments was going to be hard on us, and on the potential projects that had submitted. It is really tough when you have an idea and concept that you have given birth to and nurtured, that you believe in, and that you are trying to pitch to others. It is an emotional time - we know, because we have been there ourselves.

I think the thing that struck us about the backlog was that they all were solving real world problems, and that’s incredibly exciting for NEM and DLT as a relatively new technology.

Some projects have elected not to continue with funding as they would prefer not to give away equity, or taken another route to funding and that’s fine. We really do wish all the best on all NEM projects, and while we won’t be able to fund everything that comes over our desk, we can promise to do our very best to make an informed decision. We will certainly miss some that are great ideas and go on to be awesome, so we would urge any projects we elect not to fund to keep up the good work, prove us wrong. There are plenty of frogs to be kissed before you find your prince.

In parallel with incorporation we have reviewed all those 26 projects, asked some pretty in depth questions and got an insight into the teams that are involved in them. We have been fortunate to meet a few in person and to a person are genuine NEMbers.

Our plan is to start funding this month having carried out the backlog reviews and completed DD, and we will be sharing the process for new applications shortly. We do already have around 15 new projects that have come forward for funding that we have done first pass reviews on so it is fantastic to see the flow of ideas continue - its shows the creativity and entrepreneurial nature of NEMbers around the globe.

Thanks for everyones continued interest in Nem Ventures - we will be promoting projects that are invested in when appropriate as there will be much support the community can give to help them grow. The community really can be the difference with these projects.

26 is was what we started with. A number of them dropped out or were unresponsive during due diligence and some secured funding elsewhere to continue.

It is currently at 12 and we are finishing the first round of due diligence reviews this week and will be selecting those that move forward to deeper due diligence. So the backlog has now been worked through by approaching it systematically.

There are some early stage, some at mvp and some revenue generating and looking to scale so its a good mixed dealflow to build and early portfolio from.